Food manufacturers who sell through traditional food distribution companies must absorb a significant price mark-up on route to the retailer, raising their prices on the shelf. Some food companies could benefit from using a third party logistics provider (3PL) that specializes in storage and distribution of food products direct to grocery chains.
Use of a 3PL avoids distributor markups, enables a direct relationship with retailers, and capitalizes on 3PLs' strong capabilities in inventory management and cold chain management.
But for brands that have gained traction in the market and have chains that want the products, 3PLs could be an alternate way to get products to market. From an operations perspective, 3PLs offer many of the capabilities that traditional food distribution companies do:
But 3PLs don't offer key marketing advantages offered by distributors:
If your brand has grown and you have developed your own internal organization to perform these sales and marketing tasks, a 3PL relationship gives you strong logistical and physical food distribution capabilities, while avoiding the food distributor's mark-up and allowing you to forge a direct relationship with retailers. Read our blog on How to Choose the Right Food Logistics 3PL.